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Essentials of a trust

Updated on August 10, 2011

ESSENTIALS OF A TRUST

A trust is a relationship whereby property is managed by one person for the benefit of another. The trustees hold legal title to the trust property but they are obligated to hold the property for the benefit of one or more individuals. The trust is governed by the terms of the trust document. In Knight V Knight it was stated for a valid trust there must be;

a) Certainty of words

b) Certainty of subject matter

c) Certainty of object

Certainty of words

Equity looks at intent rather than form. There are no special words to be used to create a valid trust. An intention to create a trust may be gathered from the expressions which the settlor used. The general rule is that precatory words do not give rise to a valid trust. The courts have not been consistent in holding that such words do not create a binding trust as was the case in Lambe v Eames

The court will not allow precatory trust to be raised unless after considering all words. A trust can be inferred from the use precatory words. This would depend on proper construction of the language of the will. In Re Steele’s will trust it was seen that a trust can be inferred from the precatory words if the subject matter and objects of the trusts have been clearly indicated.

Certainty of subject matter

Subject matter of the trust can take many forms. In Re Diggles it was indicated that uncertainty of subject matter will adversely affect the creation of a trust. There are situations where the subject matter is to be decided by discretion of the trustee.

Where there are several beneficiaries to the trust, the share for each beneficiary should be determined. This could be by provision of the instrument, discretion of the trustee or discretion by court.

Certainty of objects

This entails two aspects; first the purpose of the gift should be identifiable with the certainty and secondly the interest which they take should be discoverable. Thus in Re Vader Vell’s trust, the test to be used in determining certainty of ascertainment depends on the nature of the trust.

With a fixed trust, the trust is void unless it is possible to ascertain every beneficiary. In a discretionary trust the test is whether it can be said with certainty that an individual is member or not of that class. In a discretionary trust the trustees determine the beneficiaries. No beneficiary owns any part of the trust until the trustees exercise their discretion.

Trust of imperfect obligation; in order for a trust to be valid there should be a beneficiary to enforce it. Where there is no beneficiary the trust will be regarded as unenforceable and void as was seen in the case of Re Aston’s settlement. However the imperfect obligation would be enforced by court if the trustees are disposed to execute it.

In conclusion for a trust to be recognised by the law it should contain or be constituted by the three main elements that is certainty of subject matter, object and words



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